The effect of Swedish regional investment grants during 1990-1999 on firm performance, in terms of returns on equity and number of employees, were studied using a propensity-score matching-method to control for sample selection. Firms that received grants did not perform better in terms of returns on equity when compared to matched firms in the control group. In most years, recipient firms also did not hire more employees. The results thus cast doubt on the use of regional investment grants as a general policy instrument to improve firm performance.

Many countries have undertaken central-bank independence reforms, but the years of implementation differ. What explains such differences in timing? This is of interest more broadly, as it sheds light on factors that matter for the speed at which economic reforms come about. We study a rich set of potential determinants, both economic and political, but put special focus on a cultural factor, i.e. social trust. We find empirical support for an inverse u-shape: Countries with low and high social trust implemented their reforms earlier than countries with intermediate levels. We make use of two factors to explain this pattern: the need to undertake reform (which is more urgent in countries with low social trust) and the ability to undertake reform (which is greater in countries with high social trust). Overall, our findings imply that culture matters for institutional change.

Central banks have become more independent in many countries. A common rationale has been the existence of a credibility (or lack-of-trust) problem for monetary policy. This indicates a possible and until now unexplored link between social trust and central-bank independence. Our empirical findings, based on data from 149 countries, confirm such a link, in the form of a u-shaped relationship. We suggest that two factors help explain this finding: the need for this kind of reform and the ability with which it can be implemented. At low trust, the need for central-bank independence is sufficiently strong to bring it about, in spite of a low ability to undertake reform. At high trust, the ability to undertake reform is sufficiently strong to bring high independence about, in spite of a low need for it. At intermediate trust levels, lastly, neither need nor ability is strong enough to generate very independent central banks.

A Swedish reform in 2001 made it possible for firms with less than 11 employees to exclude two from the last-in-first-out principle in case of layoffs. The reform increased employment growth with over 4000 additional jobs per year among firms with five to nine employees. Firms with 10 employees became 3.4 percentage points less likely to increase their workforce, indicating that the introduced threshold kept them from growing. Thus, employment protection legislation seems to act as a growth barrier for small firms.

A natural experiment is used to identify the causal relationship between employment protection legislation and fi rm growth. The natural experiment occurred in Sweden in 2001, when an exemption made it possible for fi rms with less than eleven employees to exclude two workers from the last-in-fi rst-out principle when dismissing personnel. The estimated average treatment effect of the reform show that the number of employees increased with 0.135 percent in fi rms with 5-9 employees relative to fi rms with 10-15 employees, which corresponds to over 5,000 additional jobs per year created by the reform. Firms with ten employees, just below the size threshold, became 3.4 percent less likely to increase their workforce to a level surpassing the threshold, indicating that the last-in- first-out rule prevented these firms from growing. Thus, employment protection legislation seems to act as a growth barrier for small fi rms.

Among 104,231 limited liability firms in Sweden with at least two employees during 1997- 2010, almost 10% did not hire new employees in any given 3-year period despite having high profits. Nearly half of these firms continued to have high or medium profits in the next threeyear period, but still no growth. Regression analysis indicates that these firms were not randomly distributed; rather they were small and young, did not belong to an enterprise group, and operated in local markets with high profit-opportunities. We conclude that it might be more beneficial to focus policy towards these firms instead of towards a few high-growth firms that, having just grown exponentially, may not be best positioned to grow further.

High-growth firms have recently received considerable attention in the firm growth literature. These firms might have grown despite the existence of growth barriers, and evidence also suggests that, having already grown exponentially, they may not be in the best position to grow further. Policies targeting high-growth firms may therefore be misdirected. We argue that entrepreneurship researchers should concentrate more on firms that are not hiring, despite having high profits. We call these firms “sleeping gazelles,” and demonstrate that they represented almost 10% of all limited liability firms in Sweden from 1997 to 2010. Nearly half of these firms continued to earn high or moderate profits in subsequent three-year periods, while still displaying no growth. Regression analyses indicate that these firms were significantly smaller, older, more likely to be active in industries with high profit uncertainty, and more likely to be located in less densely populated municipalities than were corresponding growing firms.

Among 104,231 limited liability fi rms in Sweden with at least two employees during 1997-2010, almost 10 % did not hire new employees in any given 3-year period despite having high profi ts. Nearly half of these firms continued to have high or medium pro fits in the next three-year period, but still no growth. Regression analysis indicates that these fi rms were not randomly distributed; rather they were small and young, did not belong to an enterprise group, and operated in local markets with high profi t-opportunities. We conclude that it might be more benefi cial to focus policy towards these firms instead of towards a few high-growth fi rms that, having just grown exponentially, may not be best positioned to grow further.

High-growth firms (HGFs) have attracted considerable attention recently, as academics and policymakers have increasingly recognized the highly skewed nature of many metrics of firm performance. A small number of HGFs drives a disproportionately large amount of job creation, while the average firm has a limited impact on the economy. This article explores the reasons for this increased interest, summarizes the existing literature, and highlights the methodological considerations that constrain and bias research. This special section draws attention to the importance of HGFs for future industrial performance, explores their unusual growth trajectories and strategies, and highlights the lack of persistence of high growth. Consequently, while HGFs are important for understanding the economy and developing public policy, they are unlikely to be useful vehicles for public policy given the difficulties involved in predicting which firms will grow, the lack of persistence in high growth levels, and the complex and often indirect relationship between firm capability, high growth, and macro-economic performance.

We study employment and new hires among high-growth firms (HGFs) in the Swedish knowledge-intensive sectors 1999-2002. Using matched employer-employee data, we find that HGFs are more likely to employ young people, poorly educated workers, immigrants, and individuals who experienced longer unemployment periods. However, these patterns seem contingent on the stage of the firm's evolution. HGFs that have already realized some rapid growth are more likely to hire individuals from other firms, even though immigrants are still overrepresented among new hires. In the case of both HGF employees and HGF new hires, employment opportunities in HGFs are provided by young and small firms.

When is Gibrat's law a law?2012Ingår i: Small Business Economics, ISSN 0921-898X, E-ISSN 1573-0913, Vol. 41, nr 1, s. 133-147Artikel i tidskrift (Refereegranskat)

Abstract [en]

The purpose of this article is to investigate if the industry context matters for whether Gibrat’s law is rejected or not using a dataset that consists of all limited firms in five-digit NACE-industries in Sweden during 1998–2004. The results reject Gibrat’s law on an aggregate level, since small firms grow faster than large firms. However, Gibrat’s law is confirmed about as often as it is rejected when industry-specific regressions are estimated. It is also found that the industry context—e.g., minimum efficient scale, market concentration rate, and number of young firms in the industry—matters for whether Gibrat’s law is rejected or not.

Gibrat’s Law predicts that firm growth is a purely random effect and therefore should be independent of firm size. The purpose of this paper is to test Gibrat’s law within the retail industry, using a novel data-set comprising all surviving Swedish limited liability companies active at some point between 1998 and 2004. Very few studies have previously investigated whether Gibrat’s Law seems to hold for retailing, and they are based on highly aggregated data. Our results indicate that Gibrat´s Law can be rejected for a large majority of five-digit retail industries in Sweden, since small retail firms tend to grow faster than large ones.

We use a data set covering 13,471 Swedish limited liability firms in the Swedish wholesale industries during 2000–2004 to ascertain the determinants of new start-ups and of in-migration of firms. Access to a large harbor, international airport or large railroad classification yard in the municipality nearly triples the number of start-ups and increases the expected number of in-migrating firms with 53 %. The presence of a university, many educated workers and low local taxes are also associated with more start-ups and firm in-migration.

Most firms do not grow, and a small number of high-growth firms seem to create most new jobs. These firms have therefore received increasing attention among policymakers. The question is whether high-growth tends to persist? We investigate this question using firm-level data from Sweden during 1997–2008. We find that high-growth firms had declining growth rates in the previous 3-year period, and their probability of repeating high growth rates was very low. Thus, these are essentially “one-hit wonders,” and it is doubtful whether policymakers can improve economic outcomes by targeting them.

High-growth firms have received considerable interest recently since they create most of the new jobs in the economy. The purpose of our paper is to investigate the characteristics of high-growth firms prior to their growth period, and whether these characteristics differ across industries. Using data on a large sample of limited liability firms in Sweden for the period 2007-2010, we find that high-growth firms do not have the characteristics that we typically associate with successful firms. On the contrary, our results indicate that high-growth firms have low profits and a weak financial position. This might explain why studies have found that high-growth firms are seldom capable of sustaining their high growth rates in subsequent periods, and thus question policies that are targeted towards these companies.

Purpose: This paper aims to extend and contribute to prior research on the association between company characteristics and choice of capital budgeting methods (CBMs). Design/methodology/approach: A multivariate regression analysis on questionnaire data from 2005 and 2008 is used to study which factors determine the choice of CBMs in Swedish listed companies. Findings: Our results supported hypotheses that Swedish listed companies have become more sophisticated over the years (or at least less unsophisticated) which indicates a closing of the theory-practice gap; that companies with greater leverage used payback more often; and that companies with stricter debt targets and less management ownership employed accounting rate of return more frequent. Moreover, larger companies used CBMs more often. Originality/value: The paper contributes to prior research within this field by being the first Swedish study to examine the association between use of CBMs and as many as twelve independent variables, including changes over time, by using multivariate regression analysis. The results are compared to a US and a continental European study.

The purpose of this paper is to investigate why politicians around the world have chosen to give up power to independent central banks, thereby reducing their ability to fine-tune the economy. A new data-set covering 132 countries, of which 86 countries had implemented such reforms, was collected. Politicians in non-OECD countries were more likely to delegate power to independent central banks if their country has been characterized by a high variability in historical inflation and if they faced a high probability of being replaced. No such effects were found for OECD countries.

Although the refugee immigration crisis is one of the major socio-economic challenges in Europe, we still lack knowledge on what characterizes firms that provide jobs for unemployed immigrants. We provide an answer by investigating firms that recruit unemployed non-Western immigrants using matched employer-employee data from Statistics Sweden. We find large industry differences; firms active in the service sectors, such as the hospitality, transport, and healthcare industries, are much more likely to hire unemployed non-Western immigrants than firms in high-tech and manufacturing industries. In addition, after controlling for educational attainment and industry of occupation, firms with at least one non-Western immigrant manager hire more than four times as many unemployed non-Western immigrants than firms without any non-Western immigrant managers. Public policies that target industries might thus also influence job opportunities for immigrants and, thereby, the possibility of their integration into society.

Using data on the occurence of central bank independence (CBI) reforms in 131 countries during 1980-2005, we test whether they were important in reducing inflation and maintaining price stability. CBI reforms are found to have reduced inflation on average 3.31% when countries with historically high inflation rates are included. But countries with lower inflation have reduced it without institutional reforms granting central banks more independence, undermining the theoretical time-inconsistency case for CBI. There is furthermore no evidence that CBI reforms have helped reduce inflation variability.

To identify the determinants of firm growth in the Swedish retail and wholesale industries during 2000–2004, we analyse a sample of 400 limited liability companies using quantile regression techniques. Firm growth was mainly found to depend upon time-invariant firm-specific effects, supporting Penrose's [1959. The theory of the growth of the firm (4th ed.). New York: Oxford University Press] suggestion that internal resources such as firm culture, brand loyalty, entrepreneurial skills, and so on are important determinants of firm growth.

Using data from 2000-2011, the effects of a new IKEA store on retail revenues, employment, and inflow of purchasing power in the entry municipalities, as well as in neighboring municipalities were investigated. A propensity score matching method was used to find non IKEA entry municipalities that were as similar as possible to the entry municipalities based on the situation before entry. Our results indicate that IKEA-entry increased entry-municipality durable-goods revenues by about 20% and employment by about 17%. Only small and, in most cases, statistically insignificant effects were found in neighboring municipalities.

The effects of a new IKEA store on retail revenues, employment and inflow of purchasing power in the entry municipalities as well as in neighbouring municipalities were investigated using data from 2000–11. A propensity score-matching method was used to find non-IKEA entry municipalities that were as similar as possible to the entry municipalities based on the situation before entry. The results indicate that IKEA entry increased entry municipality durable goods revenues by about 20% and employment by about 17%. Only small and, in most cases, statistically insignificant effects were found in neighbouring municipalities.

IKEA is one of the world’s largest retailers, but little is known about how IKEA impact incumbent retailers when deciding to enter a local market. Previous studies on the effects of big-box entry on surrounding retailers have also generated inconclusive results, and mainly been focused towards entry of Wal-Mart in the United States. We contribute to this literature by investigating the effects of IKEA entry on revenues and employment for incumbent retail firms in three Swedish municipalities during 2000-2010. Our results indicate that a new IKEA store increases average revenues for incumbent retailers within the entry municipality by 11%, but also that the effect is highly heterogeneous within the municipality. Retailers that were located up to 1 km from IKEA experienced a 26% increase in revenues when IKEA entered the municipality. However, the positive spillover effect of a new IKEA store on retail revenues diminished with the distance to IKEA, and turned insignificant for retailers in the city centers and those that were located 5-10 km from IKEA. The effects on employment were much less pronounced, and in most cases statistically insignificant.

A real-options approach was used, incorporating uncertainty and irreversibility of investments, to study the number of stores entering the Swedish retail food market during the period 1994-2002. It was found that uncertainty affected the entry-decision. Entry was less frequent in highly concentrated local retail food-markets characterized by a high degree of uncertainty, whereas higher profit opportunities seem to have increased the probability of entry.

The purpose of this paper is to study whether investors' willingness to realize capital gains falls when the marginal tax rate on capital gains is raised. We use a rich register-based panel data set covering almost 8% of the Swedish population. The results indicate that a 10% increase in capital gains tax rate reduces the number of realizations of capital gains with 8.7% and the realized amount, given the decision to realize, with 1.9%. In addition, we find that wealthy individuals seem to respond more to changes in capital gains tax rates than less-wealthy.

Can a simple point-of-purchase (POP) shelf-label increase sales of organic foods? We use a random-effects׳, random-coefficients׳ model, including a time adjustment variable, to test data from a natural experiment in a hypermarket in Gävle, Sweden. Our model incorporates both product specific heterogeneity in the effects of labeling and consumer adjustment to the labels over time. We find that the introduction of POP displays leads to an increase in sales of organic coffee and olive oil, but a reduction in sales of organic flour. All targeted products became less price-sensitive. The results reveal that product specific differences have to be accounted for, and in some cases consumers adjusted to labeling over time.

This paper studies the impact of the Stockholm road pricing trial on retail revenues. The analysis is performed using revenue data from 14 shopping malls, 9 within the tool area and 5 outside the tool area. The data also include revenue data from a sample of retail stores located along the main shopping streets in Stockholm. The results show that the Stockholm road pricing trial did not negatively affect retail revenue, neither in shopping malls nor in the sample of retail stores.

Did the introduction of congestion charges in Stockholm city reduce retail revenues? Data from 20 shopping malls - 8 within the toll area, and 12 outside the tool area - and from a sample of retail stores located along the main shopping streets was analyzed using an intervention-control approach. Favorable outcomes, such as reduced traffic, less emissions of carbon-dioxide, and perceived improvements in air quality and accessibility, do not seem to have been offset by reduced revenues for retailers located within the toll area.

Many European countries have abolished mandatory audits for small firms, but we still lack knowledge on whether this affects small firm growth. A Swedish reform in 2010 made audits voluntary for small firms fulfilling certain requirements, while firms that did not meet these requirements still had mandatory audits. We argue that this regulatory change created an almost perfect natural experiment, which can be exploited to evaluate the effects of the reform on employment growth using a difference-in-difference estimator. Our results show that firms who fulfil the requirements for voluntary auditing, as compared to a control group of firms that does not, increased their employment growth rates by on average 0.39%, corresponding to 5 500 jobs being created in the three years following the reform. It thus seems that voluntary audits are reducing the regulatory burden for small firms, making resources available that can be used to increase the number of employees. The current threshold levels for mandatory audits are still significantly lower in Sweden than in most other European countries, which implies that the policymakers in Sweden could create more jobs in small and medium-sized firms if they increased the size threshold levels for mandatory audits.

Many European countries have abolished mandatory audits for small firms to reduce the regulatory and administrative burden for these firms. However, we still lack knowledge on whether such legislative changes affect employment growth for those firms that become free to choose to have external audits. We investigate this question using a Swedish reform that made audits voluntary for small firms fulfilling certain requirements. The reform created an almost ideal natural experiment, which we use to evaluate the effects of voluntary audits on employment growth for small firms using a difference-in-difference estimator. We find that firms which fulfilled the requirements for voluntary auditing, compared to a control group of similar firms that did not, increased their employment growth rate by 0.39%. This corresponds to 1,830 jobs being created in the year following the reform, suggesting that mandatory audits act as a growth barrier for small firms.

Reducing the regulatory burden for firms will free resources that can be used for productive investments. In this paper, we investigate the effect of a change in regulations, in effect abolishing statutory audits for Swedish micro firms in November 2010, on employment growth in the affected micro firms. The changes in regulations created what we argue is an almost perfect natural experiment that can be exploited to evaluate the effects of the reform on employment growth using a difference-in-difference estimator. Our results show that employment growth is higher in firms which fulfil the requirements for voluntary auditing as compared to a control group of firms of similar sizes that does not, and the positive treatment effect is found for micro firms in all Swedish counties and in all types of industries. We estimate that the reform created 1276 jobs in the three years following the reform. We thus suggest that the current threshold for statutory audits should be increased in Sweden, whose threshold levels for statutory audits are significantly lower than in most other European countries even after the 2010 changes in regulations. Such a regulatory change would, in all likelihood, lead to employment growth in the affected firms.

Empirical studies demonstrate that most net job-growth originates from a small number of high-growth firms (HGFs). The purpose of this paper is to analyze whether family ownership matters for being an HGF, using data on all private firms in Sweden during 1993–2006. Our study is possible due to a tax reform that required tax authorities to identify family relations among ultimate owners of every Swedish firm. We find that family ownership at first sight decreases the probability of exhibiting high growth, but further analysis indicates a more complex relationship. The negative effect of family ownership seems to be driven primarily by small firms, and sometimes even becomes positive when firm growth is analyzed over longer time periods. In addition, the negative effect of family ownership is no longer present when we analyze firms that transferred ownership and control for unobserved time-invariant firm-specific heterogeneity.

In February 1912, the Slaughterhouse Reform was introduced by the city of Stockholm to address the unsanitary conditions prevalent in the production and sale of meat, and thereby improve food safety. However, opponents argued that the reform would lead to price increases, and that poorer households would therefore replace meat with cheaper products. We find that meat prices increased by 21% due to the introduction of the reform, which meant that consumers had to pay a substantial cost for improved food safety within the boundaries of Stockholm.